Test #2 Accounting 132 Managerial accounting
Popular in Accounting
Popular in Department
This 14 page Study Guide was uploaded by Ricardo Gaytan on Thursday May 5, 2016. The Study Guide belongs to Accounting 132 Managerial accounting at Illinois State University taught by Marie Dawson in Spring 2016. Since its upload, it has received 60 views.
Reviews for Test #2
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 05/05/16
Accounting 132 Marie Dawson Test #2 Missing 764765766 True/False 1) The sales budget is usually prepared before the production budget a. TRUE 2) The cash budget is the starting point in preparing the master budget a. FALSE 3) When preparing a direct materials budget, beginning inventory for raw materials should production needs, and desired ending inventory should be subtracted to determine the raw materials to be purchased a. FALSE 4) The number of units to be produced in a period can be determined by adding the expenses to the desired ending inventory and then deducting the beginning inventory a. TRUE 5) On a cash budget, the total amount of budgeted cash payments for manufacturing overhead does not include any amounts for depreciation on factory equipment a. TRUE 6) The main difference between a flexible budget and a static budget is that a flexible budget does not contain fixed costs a. FALSE 7) A revenue variance is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of activity for the period a. TRUE 8) A planning budget is prepared before the period begins and is valid for only the planned level of activity a. TRUE 9) A Flex budget is an estimate of what revenues and costs should have been given the level of activity had been planned for the period a. FALSE 10)It is not important that the activity base and overhead costs be casually related when developing a Flex budget a. FALSE 11)Practical standards allow for normal machine downtime and employee rest periods a. TRUE 12)In zerobased budgeting, only changes from the prior budget must be justified a. FALSE 13)A direct material quantity standard generally includes an allowance for waste a. TRUE 14)Most companies compute the materials price variance when materials are placed into production a. False Accounting 132 Marie Dawson Test #2 15)An Unfavorable labor rate variance can occur if workers with high hourly wage rates are assigned to work on products whose standards assume workers with low hourly wage rates a. TRUE 16)In a standard cost system, overhead is applied on the basis of the actual level of activity rather than the standard level of activity allowed for the output of a period a. FALSE 17)A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor ours. The company’s choice of the denominator level of activity has no effect on the fixed portion of the predetermined overhead rate a. FALSE 18)There can be no volume variance for variable overhead a. TRUE 19)Budget Variances arise when the actual amount spent on fixed overhead items is stated budget for fixed overhead a. TRUE 20)The volume variance for fixed overhead is an activityrelated variance based on the difference between the denominator level of activity allowed for the output of a period a. TRUE Matching a. Budget Variance b. Flex Budget c. Efficiency Variance d. Volume Variance e. Standard Cost Card f. Predet. OH Rate g. Ideal Standards h. Denominator Activity i. Standard Quantity Allow j. Planning or Static Budget (A) Difference between budgeted fixed overhead and actual fixed overhead (B) A budget that is designed to cover a range of activity and that can be used to develop budgeted costs at any point within the range to compare to actual costs incurred (C) Name of the variance that can occur for direct labor or variable overhead and is the indicator of the time actually spent and the time allowed given the actual ouput achieved (D) The variance that arises whenever the standard hours allowed for the output of a period are different from the denominator activity level that was used to compute the predetermined overhead rate (E) A detailed listing of the standard amounts of inputs that should go into a unit of product, multiplied by the standard price or rate that has been set for each input (F) Used to charge overhead costs to jobs, established in advance for each period using estimates of total manufacturing overhead cost and of the total allocation base for the period Accounting 132 Marie Dawson Test #2 (G) Standards that allow for no machine breakdowns or other work interruptions and that require peak efficiency at all times (H) The activity figure used to compute the predetermined overhead rate (I) The amount of materials that should have been used to compute the period’s actual output, it is computed by multiplying the actual number of units produced by the standards quantity per unit. (J) A budget created at the beginning of the budgeting period that is valid only for the planned level of activity Matching Part 2 a. Price variance b. Master Budget c. Overhead Budget d. Quantity Variance e. Ideal Budget f. Predet Overhead Rate g. Standard Quantity Per Unit h. Management by Exception I. Cash Budget j. Var. OH Rate Variance (A) A variance that is computed by taking the difference between the actual price and the standard price and multiplying the result by the actual quantity of the input (B) A number of separate but interdependent budgets that formally lay out the company’s sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet (C) A detailed plan showing the production costs, other than direct materials and direct labor, that will be incurred over a specified time period (D) A variance that is computed by taking the difference between the actual quantity of the input used and the amount of the input that should have been used for the actual level of output by the standard price of the input (E) Use of this type of budget for performance evaluations is not advised due to the fact that it may never be achieved and negatively affect moral among the workers (F) A rate used to charge manufacturing overhead cost to items produced that is established in advance for each period. It can be found on the manufacturing overhead budget. It can be split into variable and fixed portions (G) The amount of an input that should be required to complete a single unit of product, including allowances for normal waste, spoilage, rejects (H) A management system in which standards are et for various activities, with actual results compared to these standards. Significant deviations from standards are flagged as exceptions (I) A detailed plan showing how cash resources will be acquired and used over a specific time period. It is developed from several budgets that must be adjusted for noncash items like depreciation expense (J) The difference between the actual variable overhead cost incurred during a period and the standard cost that should have been incurred based on the actual activity of the period. It is also referred to as the variable overhead spending variance Multiple Choice 1. When Preparing a production budget, the required production equals: Accounting 132 Marie Dawson Test #2 a. budgeted sales – beginning inventory + desired ending inventory 2. Sharp Company, a retailer, plans to sell 15,000 units of product X during the month of August. If the comp[nay has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month? a. 14,500 3. The direct labor budget is based on: a. The required production for the period 4. Hamway Products, Inc, makes and sells a single product called a Wob. It takes two yards of material A to make one Wob. Budgeted production of Wobs for the next four months is as follows: April 12,000 units 1200 May 13,500 units 1350 June 12,400 units 1240 July 11,200 units 1120 * 2 = 2240 The company wants to maintain monthly ending inventories of material A to equal 10% of the following months production needs. The cost of material A is . 90 per yard. The desired ending inventory of material A for the month of June is a. 2,240 yards 5. A detailed financial plan for the future is known as a: a. Budget 6. Comparing actual results to a budget on actual activity for the period is possible with the use of a a. Flexible Budget 7. A static budget is also known as a planning budget and is: a. A budget for a single level of activity 8. The fixed overhead budget variance is measured by: a. The difference between budgeted fixed overhead cost and actual fixed overhead cost Harris, Inc, had budgeted sales in units for the next five months as follows: June 9,400 units July 7,800 units August 7,300 units September 5,400 units October 4,100 units Past experience has shown that the ending inventory for each month should be equal to 20% of the next month’s sales in units. The inventory on May 31 contained 1,880 units. The company needs to prepare a production budget for the next five months. 9. The beginning inventory IN UNITS for September: a. 1,080 10. The total number of units produced in July: Accounting 132 Marie Dawson Test #2 a. 7,700 11. A flex budget is a budget that a. Is updated to reflect the actual level of activity ina period 12. A major weakness of flexible budgets is that a. ********* 13. An activity variance is the difference between a. How much a cost should have been, given the actual level of activity, and the actual amount of the cost 14. When using a Flexible budget, what will occur to fixed costs as the activity level increases within the relevant range a. Fixed costs per unit will decrease 15. Blackwelder Snow removal’s cost formula for its vehicle operating cost is $1,240 per month plus $348per snow day. For the month of December, the company planned activity of 12 snowdays, but the actual level of activity was 14 snow days. The actual vehicle operating cost for the month was $6,330. The vehicle operating cost in the planning budget for December would be closest to: a. $5,416 16. Poor quality materials could have an unfavorable effect on which of the following variances? a. Labor efficiency Variance: YES Materials Quant. Variance: YES 17. The Collins company uses standard costing and has established the following direct material and direct labor standards for each unit of a single product it makes: Direct materials…….4 gallons at $8 per gallon Direct Labor……….1 hour at $16 per hour During July, the company made 6,000 units of product and incurred for the following costs: Direct materials purchased……26,800 gallons at $8,20 per gallon Direct materials used………….25,200 gallons Direct labor used………………5,600 hours at $15.30 per hour 51. The material price variance for July was: A) $5.360 favorable C) $5,040 favorable B) $5,360 unfavorable D) $5,040 unfavorable B. 5360 52. The materials quantity variance for July was: A) $22,960 unfavorable C) $9,600 unfavorable B) $22,400 unfavorable D) $9,840 unfavorable Accounting 132 Marie Dawson Test #2 C. 9600 53. The labor rate variance for July was: A) $3,920 unfavorable C) $1,120 favorable B) $6,120 unfavorable D) $3,920 favorable D. 3920 54. The labor efficiency variance for July was: A) $6,400 favorable C) $10,320 favorable B) $89,600 favorable D) $6,120 favorable A. 6400 55. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a A) favorable efficiency variance C) unfavorable efficiency variance B) favorable spending variance D) unfavorable spending variance B. Favorable Spending Variance 56. Which of the following would produce a labor rate variance? A) poor quality materials causing breakage and work interruptions B) Use of persons with high hourly wage rates in tasks that call for low hourly wage rates C) Excessive number of hours worked in completing a job D) An unfavorable variable overhead spending variance B. Use of persons with high hourly wage rates in tasks that call for low hourly wage rates 57. Comparing actual results to a budget on actual activity for the period is possible with A) monthly budget B) master budget C) Flexible budget D) Rolling budget C. Flexible Budget _____58. A static budget is also known as a planning budget and is: A) a budget for a single level of activity B) a budget that ignores inflation C) Used only for fixed costs D) Used when the mix of products does not change Accounting 132 Marie Dawson Test #2 A. A budget for a single level of activity _____59. (29)A flexible budget is a budget that: A) is updated with actual costs as they occur during the period B) is updated to reflect the actual level of activity during the period C) is prepared using a computer spreadsheet application D) contains only variable production costs B. is updated to reflect the actual level of activity during the period ______60. Poor quality materials could have an unfavorable effect on which of the following variances? Labor efficiency Variance Materials Quant. Variance A) Yes Yes B) Yes No C) No Yes D) No No A. Labor efficiency variance: Yes Materials quantity variance: Yes ______61. When using a flex budget, what will occur to fixed costs as the activity level increases within the relevant range? A) fixed costs per unit will decrease B) Fixed costs per unit will remain unchanged C) Fixed costs per unit will increase D) Fixed costs are not considered in flex budget A. Fixed costs per unit will decrease ______62. When the actual price paid on credit for a raw material is less than its standard price, the journal entry would include: A) Debit to Raw Materials; Credit to Materials Price Variance B) Debit to Accounts Payable; Credit to Materials Price Variance C) Debit to Raw Materials; Debit to Materials Price Variance D) Debit to Accounts Payable; Debit to Materials Price Variance A. Debit to Raw Materials; Credit to Materials Price Variance Accounting 132 Marie Dawson Test #2 *Pardoe, Inc manufactures a single product in which variable manufacturing overhead is assigned on the basis of direct labor hours. The company uses a standard cost system and has established the following standards for one unit of product: Standard Standard Price Standard Cost Quantity or rate Direct materials……………… 1.5 pounds $3.00 per pound $4.50 Direct Labor……………………..0.6 hours $6.00 per hour $3.60 Variable manufacturing overhead..0.6 hours $1.25 per hour $0.75 During March, the following activity was recorded The company produced 3,000 units during the month A total of 8,000 pounds of material were purchased at a cost of $23,000 There was no beginning inventory of materials on hand to start the month, at the end of month, 2,000 pounds of material remained in the warehouse During March, 1600 direct labor hours were worked at a rate of $6.50 per hour Variable manufacturing overhead costs during March totaled $1,800 ____63. The materials price variance for March is: A) $1,000 F B) $1,000 U C) $750 F D) $750 U A. 1000 F ____64. The materials quantity variance for March is: A)$4,500 F B) $10,500 F C)$10,500 U D) $4,500 U D. 4500 u ____65. The fixed overhead budget variance is measured by: A) the difference between budgeted fixed overhead cost and actual fixed overhead costs B) the difference between actual fixed overhead cost and applied fixed overhead cost C) the difference between budgeted fixed overhead cost and applied fixed overhead cost D) None of these A. the difference between budgeted fixed overhead cost and actual fixed overhead costs Accounting 132 Marie Dawson Test #2 _____ 66. If the actual cost incurred is greater than what the cost should have been as set forth in the Flex budget, variance is: A) labeled as favorable B) labeled as unfavorable C) cannot be labeled as favorable or unfavorable without obtaining an explanation D) an activity variance B. Labeled as unfavorable _____67. Marchi Family Inn is a bed and breakfast establishment in a converted 100 yearold mansion. The Inn’s guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn’s overhead budget for the most recent month appears below: Activity level 65 guests Variable overhead costs: Supplies………………… $156 Laundry………………… 364 Fixed overhead costs: Utilities………………… 250 Salaries and wages…….. 4,480 Depreciation…………… 1,330 Total overhead cost……… $6,580 The Inn’s variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 70 guests? Accounting 132 Marie Dawson Test #2 A) $42,460.00 B) $6,620.00 C) $7,086.15 D) $6,580.00 B. 6620.00 _____68. Blackwelder Snow removal’s cost formula for its vehicle operating cost is $1,240 per month plus $348per snow day. For the month of December, the company planned activity of 12 snowdays, but the actual level of activity was 14 snow days. The actual vehicle operating cost for the month was $6,330. The vehicle operating cost in the planning budget for December would be closest to: A) $5,426 B) $6,112 C) $5,416 D) $6,330 C. 5416 ______69. Cunningham’s Deli compares monthly operating results with a static planning budget prepared at the beginning of the year. When actual sales are less than budget, the restaurant would usually report favorable variances on: A) fixed supervisory salaries and variable food costs B) variable food costs but not fixed supervisory salaries. C) Fixed supervisory salaries but not variable food costs D) Neither fixed supervisory salaries or variable food costs B. Variable food costs but not fixed supervisory salaries ______70. A favorable materials price variance coupled with an unfavorable material usage variance would most likely result from: A) labor efficiency problems B) machine efficiency problems C) the purchase and use of higher than standard quality material D) the purchase and use of lower than standard quality material D. The purchase and use of lower than standard quality material ______71. Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. Activity level…………………… 6,800 machinehours Variable overhead costs: Accounting 132 Marie Dawson Test #2 Supplies………………………. $22,440 Indirect labor………………. 55,760 Fixed overhead costs: Supervision………………… 19,300 Utilities………………………. 5,700 Depreciation……………….. 7,400 Total overhead cost……... $110,600 The company’s variable overhead costs are driven by machinehours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machinehours rather than 6,800 machinehours? Assume that the activity levels of 6,800 machinehours and 6,600 machinehours are within the same relevant range. A $107,824.00 B) $110,600.00 C) $108,300.00 D) $107,347.06 C. 108300.00 ______72. Bullins Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machinehours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity……………………………….. 5,600 MHs Actual level of activity……………………………………. 5,900 MHs Cost formula for variable overhead cost…………. $4.80 per MH Budgeted fixed manufacturing overhead cost….. $48,000 Actual total variable overhead………………………… $30,090 Actual total fixed manufacturing overhead………. $44,000 What was the fixed manufacturing overhead budget variance for the month? A)$4,000 unfavorable B) $1,440 favorable Accounting 132 Marie Dawson Test #2 C) $1,440 unfavorable D) $4,000 favorable D. 4000 favorable ______73. A major weakness of static budgets is that: A the difference between actual fixed overhead cost and applied fixed overhead cost B they cannot be used to assess whether variable costs are under control C they force the manager to compare actual costs at one level of activity to budgeted costs at a different level of activity D all of these D. All of these ______ 74. An activity variance is the difference between: A)…in the static planning budget and the same item in the flexible budget B) how much a cost should have been, given the level of activity, and the actual amount of the cost C) a revenue or cost how much the revenue should have been, given the level of activity, and the actual revenue of the period D) none of the above A. …in the static planning budget and the same item in the flexible budget ______ 75.An unfavorable material quantity variance indicates that: A) Actual usage exceeds the standard material allowed for output B) Standard material allowed for output exceeds the actual usage of materials C) Actual material price exceeds standard price D) Standard price exceeds actual material price A. Actual usage exceeds the standard material allowed for output Accounting 132 Marie Dawson Test #2 ______76.An unfavorable fixed manufacturing overhead volume variance would be caused by: A) actual fixed manufacturing overhead costs being greater than budgeted fixed manufacturing overhead costs B) actual fixed manufacturing overhead costs being greater than applied fixed manufacturing overhead costs C) fixed manufacturing overhead costs being over applied for the period D)the… hours exceeding the standard hours allowed for the output of a period D. the… hours exceeding the standard hours allowed for the output of a period ______ 77. The following labor standards have been established for a particular product: Standard laborhours per unit of output…. 5.0 hours Standard labor rate…….. $19.85 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked…. 7,300 hours Actual total labor cost….. $148,190 Actual output…. 1,400 units What is the labor efficiency variance for the month? A) 5955 U B)9240 U C)9240 F D)6090U A. 5955 U ______ 78) Harris company uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor hours (DLHs). The company has provided the following data. Denominator activity…………………………….5,000 DLHs Actual activity……………………………….…..5,600 DLHs Standard hours allowed for the output…………..5,500 DLHs Predetermined overhead rate $(2 var.+$3 fixed) $5 per DLH The volume variance would be: A) $2,500 F B) $1,800 F C) $1,800 U D) $1,500 F D. 1500 F Accounting 132 Marie Dawson Test #2 ______ 79) During June, Bradely company produced 4,000 units of product. The standard cost card indicated the following labor standard per unit of output: 3.5 hours at $6 per hour=$21. During the month, the company worked 15,000 hours. The standard hours allowed for the month were: A) 14,000 hours B) 15,000 hours C) 24,000 hours D) 18,000 hours A. 14000 hrs ______ 80) Cox Company’s direct material costs for the month of January were as follows: Actual quantity purchased 18,000 kilograms Actual unit purchase price $3.60 per kilogram Materials price VarianceU (based on purchases) $3,600 Standard quantity allowed for actual production 16,000 kilograms Actual quantity used 15,000 kilograms For January there was a favorable direct materials quantity variance of: A)$3360 B) $3373 C) $3,400 D) $3,800 C. 3400
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'